Greece’s lenders fail again to clinch debt deal
International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next Monday, but Germany signalled that significant divisions remain.
Eurozone finance ministers, the International Monetary Fund and the European Central Bank were unable to agree in 12 hours of overnight talks in Brussels on how to make the country’s debt sustainable. They want a solution before paying the next loan tranche which is urgently needed to keep Greece afloat.
Several European officials played down the delay, saying the disagreements were technical and a deal would be reached when they meet again on Monday.
German Finance Minister Wolfgang Schaeuble said he was confident the funding gap could be filled by a mixture of letting Greece buy back its own debt at a discount, tapping ECB profits on Greek bond purchases, and lowering interest rates on government loans to Athens, but not below the cost to lenders.
“Additional measures are needed and we have spoken about this intensively with the International Monetary Fund. We agree essentially that the gap can and will be filled, that a buyback programme of Greek debt on the market will be carried out,” Schaeuble told reporters.
Schaeuble earlier told conservative lawmakers at a closed-door briefing that the lenders were split over how to define debt sustainability and fill a hole in Greek finances.
“He sees the extension of the debt sustainability goal as one of the main bones of contention. The other is how to cover the Greek financing gap of €14 billion through 2014,” said one lawmaker who attended the meeting of Chancellor Angela Merkel’s centre-right Christian Democrats in Parliament.
European governments want to give Greece an extra two years, until 2022, to cut its debt to a sustainable level of 120 per cent of GDP but the IMF does not agree.
The Europeans, led by Germany, are refusing to write off any loans. Both options would make it easier for Greece to meet the targets in the bailout programme.
Merkel told the lawmakers the gap could be plugged by lowering interest rates on loans to Greece, extending their maturity to 30 years from 15, and increasing guarantees provided to the eurozone’s temporary EFSF bailout fund, in which Germany would take its share, a participant said.
“I believe there are chances, one doesn’t know for sure, but there are chances to get a solution on Monday,” Mrs Merkel told the Bundestag.
Greece needs the next €31 billion aid tranche to keep servicing its debt and avoid bankruptcy. Its next major repayment is in mid-December.